Joel Libava
The answer: Yes…the SBA does assist with franchise loans.
The 7 (a ) Loan Program is the most common type of SBA loan. As a matter of fact, some of the best franchise loans around are SBA Loans…lots of them are 7 (a ) Loans.
But, before I share some useful information on SBA Loans-you need to know one very important thing:
The SBA-The US Small Business Administration, does not loan money. Surprised?
What the SBA does is provide guarantees, sometimes up to 85% of the loan amount, that commercial banks…including maybe even the bank right up the street from you, approve.
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Tip: When you start looking around for a lender-make sure they are approved for SBA Loans. Then fill out a Loan Application.
When purchasing a franchise, it is imperative to have your books in order. https://t.co/DBMSdsVIql by @FranchiseKing
— Entrepreneur (@EntMagazine) June 30, 2014
If you’re purchasing a franchise, a 7 (a ) Loan may end up being the type of loan you apply for and receive.
Here are the things 7 (a ) SBA Loans can be used for:
- To provide long-term working capital to use to pay operational expenses, accounts payable and/or to purchase inventory
- Short-term working capital needs, including seasonal financing, contract performance, construction financing and exporting
- Revolving funds based on the value of existing inventory and receivables, under special conditions
- To purchase equipment, machinery, furniture, fixtures, supplies or materials
- To purchase real estate, including land and buildings
- To construct a new building or renovate an existing building
- To establish a new business or assist in the acquisition, operation or expansion of an existing business
- To refinance existing business debt, under certain conditions
Franchise Q & A: Does The SBA Loan Money For Franchises?
Some banks are SBA Preferred Lenders. Try to get with one of those if possible.
Information about Preferred Lenders:
The Preferred Lenders Program (PLP) is part of SBA’s effort to streamline the procedures necessary to provide financial assistance to the small business community. Under this program, SBA delegates the final credit decision and most servicing and liquidation authority and responsibility to carefully selected PLP lenders. The SBA, however, will continue to check loan eligibility criteria.
To be considered, lenders must have a good track record with the SBA, and must have demonstrated a proficiency in processing and servicing SBA-guaranteed loans.
SBA Loan Video
The SBA produced a short video that explains the 7 (a ) Loan program in an easy to follow way. Enjoy the video!
Do you have any questions about SBA Loans?
Do you have any questions about franchise ownership?
Most of them can be answered by reading this comprehensive article.
About the Author
Joel Libava is The Franchise King® — an independent franchise advisor with 25+ years in the industry, two published books on franchising, and his writing has been featured in The New York Times, Forbes, CNBC, Entrepreneur® Magazine and others. In addition, he wrote exclusively for the U.S. Small Business Administration blog for eight years. He doesn't sell franchises. Instead, Joel helps you figure out if franchise ownership is actually right for you — and if it is, teaches you his powerful, proven-to-work franchise research techniques, so you can make a smart, informed decision on a franchise to own and be your own boss.
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